Social Network Data and Underwriting: Coming to an Insurance Company near You
We are all increasingly aware of the implications that posting the most detailed and private aspects of our lives via social media outlets can have on getting that new job or protecting oneself from online stalkers and predators. But, did you ever dream that “friending” the science nerd from high school that you haven’t seen in 25 years could have an effect on your insurance premiums? Sure, you want to see if your suspicions are confirmed and he is now the CEO of a multi-million dollar bio-chemical engineering firm, but does being his virtual friend give your insurance company cause to slap you with a new surcharge on your premium? While that example might be extreme, the idea is catching on that what you do with your Facebook and other social networking accounts could send a message to insurers on the type of risk that you pose as an insured.
A recent article posted by the Insurance Journal takes a look at the potential usefulness and challenges related to using social network data as an indicator for pricing premiums. According to the article, sifting through social network pages is already a common practice in helping to identify potentially fraudulent claims, thus emphasizing that you should always be careful what comments, photos, or other details you post on the Internet. And to take it further, just as insurers are becoming more responsive to the connection between an insured’s credit score and their potential risk for loss, the connection between the activities you engage in online and your riskiness as an insured is starting to become a hot topic as well.
The things that you communicate online via public forums, wall posts, activity and interest selections, status updates, etc. can be used by insurers to develop a risk profile based on your perceived lifestyle. Not only can your own activities and posts be used, but insurers are developing a “social graph” that shows how individuals are connected with one another through friending, friends of friends, or followers on Twitter. According to the article, these graphs can give information on how an insured may perform as a risk based on the behavior of the friends that he or she is connected to.
“Privacy settings,” you say? Well, even if you feel like your online profiles are in constant lock-down, unable to be breached by even the most adamant of social network stalkers, you still may be in danger of relaying more information to others than you might think. The article further details some ways that persons trying to gain access to information on your account go about doing so. Do you have a Facebook friend that accepts the friendship of literally anyone who asks? That could lead to a breach if you haven’t blocked access to your account through friends of friends. Did you forget to block access to all photos in your profile, or are you tagged in photos on other friends’ accounts? Oops, another potential breach. If you think about it, the list of potential “Oops” just keeps growing.
There are definite obstacles that insurers face that will impede the speed-to-market of using social networking data in underwriting criteria. Developing advanced data analysis techniques and methods for procuring and validating information are the first steps towards translating social data into an underwriting tool. Also, one would have to imagine that passing these new underwriting rules through regulatory channels will be a challenge in itself. There are also the questions related to the ethical and legal nature of extracting information about an insured without their express knowledge. The article suggests that one way of dealing with the issue is to seek the permission of insureds to use their social data, and to even offer discounts if permission is granted.
What do you think? Will companies use social data as part of their underwriting in the next three years as the article suggests? What will you do and how will you feel if your insurance company begins examining your social networking sites to gain information on you as a risk?